Rusal and BlueScope Steel criticises price link to EU

The government's plans to link Australia's emissions trading scheme to Europe have been attacked by the chairmen of two of Australia's biggest carbon polluters.

John Hannagan, chairman of the Australian arm of the world's largest aluminium producer, Rusal, said the move "simply doesn't make sense" and that instead of linking the carbon scheme to Europe, any linkage should be to our major trading partners such as China and the US.

He added: "If we go with Europe, politicians in Europe can determine the price of carbon in Australia and we are handing over control of the competitiveness of our economy to bureaucrats and politicians in Europe."

BlueScope Steel chairman Graham Kraehe said that the government's move to dump the controversial $15-a-tonne floor price was a "tiny step in the right direction".

"However it completely fails to address the major issue," Mr Kraehe said. "For three years until July 2015, Australian businesses already struggling to compete due to a high Australian dollar, high costs and excessive regulation will also be subject to the world's highest carbon price."

Major business groups including the Business Council of Australia have insisted they face the world's highest carbon price but last night, the office of Climate Change Minister Greg Combet hit back at "Tony Abbott's fallacious claim that this will be the world's highest carbon price".

Major business groups including the Business Council of Australia have insisted they face the world's highest carbon price but last night, the office of Climate Change Minister Greg Combet hit back at "Tony Abbott's fallacious claim that this will be the world's highest carbon price".

The spokesman said the aluminium and steel industries were getting very extensive assistance - giving them an effective carbon price at the start of the fixed price period of $1.30 a tonne, rather than the headline rate of $23 a tonne - and the effective assistance rate would be increased because of the government's carbon redesign. The EU was our second-biggest trading partner as a bloc and the government was in discussions with schemes being developed in China, Korea, New Zealand and California and the plan was to move towards linking with developing schemes in the Asia-Pacific, the spokesman said.

Rusal is a 20 per cent shareholder in Queensland Alumina, with the other 80 per cent held by mining giant Rio Tinto. Mr Hannagan has been a critic of carbon pricing since the 1990s.

The Opposition Leader called the government "wrong-headed" for linking the scheme to the EU, while some company executives privately said they were reluctant to start buying up cheap European emissions permits when the Coalition was vowing to dump the emissions trading scheme if it wins office.

Reserve Bank board member Heather Ridout welcomed the government's move to dump the floor price and said the European scheme had been in place for a long time. But she expected that business concerns about the carbon tax would remain.